Storm victims often uninsured

Thursday

May 26, 2011 at 12:01 AMMay 26, 2011 at 11:55 AM

ATLANTA (AP) — Many of the states hammered by what’s already the deadliest year for tornadoes in more than half a century have among the nation’s highest rates of homes without hazard insurance despite being among the most twister-prone, data analyzed by The Associated Press show.

That means the regions that most need the insurance are often the exact places that don’t have much of it. It also means many tornado victims might have a hard time getting compensated for their losses, putting more pressure on the federal government to help even though its assistance is limited by law.

With more than 450 deaths and billions of dollars in damage in the past month alone, regulators are calling for more education about the importance of homeowners insurance and further efforts to make it affordable and available to all. But whether to buy it is still considered a personal choice and there’s no push to mandate it federally.

The fallout is on stark display in Mississippi and Arkansas, two of seven Southern states battered last month by twisters. Mississippi ranks second in the nation for the percentage of homes without insurance covering wind damage yet fourth on the list of states that have had the most tornadoes touch down in the past five years. Arkansas ranks fourth for uninsured homes and 10th for being tornado prone, according to the AP’s analysis.

Missouri, site of Sunday’s tornado outbreak with at least 125 dead, falls somewhere in the middle on hazard insurance despite being the fourth-most tornado-prone state. Kansas and Oklahoma, the sites of deadly tornadoes Tuesday, also fall in the middle and rank No. 2 and No. 6 on the list of tornado-prone states.

States with the highest rates of uninsured homeowners also tend to have a higher incidence of homes without mortgages, meaning owners don’t have to answer to banks requiring coverage. The uninsured can turn to aid groups and the federal government for relief — but often not for full compensation.

Poverty and an abundance of older homes that can be difficult to insure contribute to high rates of no insurance. In tough economic times, the temptation to forgo insurance is real.

Tammy and Kevin Cudy of Joplin, dropped their homeowner’s policy, and its $50-a-month premiums, last August after Kevin lost his construction job. They considered reinstating their policy within the past week but said they were unable to reach their insurance agent by telephone.

And then the deadliest single tornado in nearly six decades demolished their five-bedroom home Sunday.

“That’s why I’m kicking myself right now,” said Tammy Cudy, 47. “The fact that we were thinking about it, that we needed to work our budget around it, it just makes you kind of heartsick at this point.”

Many people don’t qualify for insurance if their homes are in high-risk areas, or they have trouble affording a policy to cover wind damage because of high costs associated with home value, aging construction and building codes, Arkansas Insurance Commissioner Jay Bradford said.

“The loss ratios on those houses that are insured are generally pretty high,” Bradford said. “They don’t have central heat and air. They are older homes. Sometimes, the plumbing and wiring are not up to standard. The rates are higher, and the coverage is limited.”

Bradford is among regulators calling for more education and strategies to make insurance more affordable. Yet he opposes a mandate, as do many lawmakers from tornado zones.

By law, the Federal Emergency Management Agency can provide up to $30,300 in grants for home repairs, rental assistance and other disaster-related losses in presidentially declared disaster areas. But that may not cover the cost to rebuild. Insured homeowners can still qualify for FEMA aid, but the assistance is reduced by the amount of the insurance settlement.

Homeowners also might be eligible for low-interest loans from the Small Business Administration. Unlike the FEMA program, the SBA money must be repaid, and if the loan is over a certain amount the agency will take a lien against the property until the money is repaid.

The AP analyzed data compiled by the Insurance Information Institute and the U.S. Census Bureau. AP relied on 2008 figures because those were the most recent for which comparisons could be made, but it’s unlikely the numbers would have fluctuated much in the past three years, said industry expert Robert Hartwig.

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